It is that time of year again… Todd, why did my payments go up on my mortgage?

Every year, at about this time, I
start to get calls from
people that their mortgage payments have increased. They
call yelling at me
saying “Todd, you remember at the closing table both you and the escrow
officer
insured us that this was a fixed rate mortgage, how come are payments
have
risen?”

Well, there are 4 parts to your
mortgage, principal,
interest, taxes and insurance. The first two principal
and interest are fixed
and those are what you agreed to when you signed the loan, they will be
fixed
for the entire 30 years and will never change.

The next two however aren’t fixed
and aren’t really part of
the mortgage, they are just collected by your mortgage
company and paid on your
behalf. Insurance can go up or down and based on that, you could
actually have
to pay them less next year. But, the taxes, well, we all know those
don’t go
down, they only go one direction and that is the one that is actually
causing
your payments to increase.

What is happening is your
mortgage company has to increase
the amount they are holding in escrow for you in order to pay the taxes
every
year on your behalf, because if they don’t then you would get a huge
tax bill
every year rather than having it taken with your payments each month.

So, I hope this explains why your
monthly payments went up
on your 30 year fixed mortgage. If you know anyone looking
to buy or sell a
home in the Beaverton, Washington County area, give them our number, we
are the
Friendly home team and we would love to help another family home.

I am a licensed Realtor who specializes in Washington County, Oregon and also work in both Clackamas and Multnomah Counties including the cities of Aloha, Beaverton, Canby, Clackamas, Gladstone, Gresham, Happy Valley, Hillsboro, Milwaukie, Oregon City, Sherwood and Tigard. All information contained in these posts are copyrighted and cannot be used without prior written approval authorization from the author me Todd Clark. If you are looking for an outstanding agent please give me a call I would love to help you with all your real estate needs.

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So much information is distributed at closing that infrequent buyers miss a great deal of it. I know a smart buyer who got an ARM and was surprised four years later to find out that their payment was about to adjust.

Todd, I know I am in the minority, but, I like to pay my property separately. I don't like having it all escrowed, however if you are buying a home and cannot master saving for your property taxes, maybe you aren't ready to buy that house. That is just my opinion and I know I am in the vast minority, but that is my opinion. As my friend Liz says, that and $10 will get you into the movies.

Todd, I'm surprised that clients aren't aware of this. And, it seems that the mortgage companies way over escrow when there's a tax increase - but that's because they have to play "catch up" - paying the short fall of last year's taxes then preparing for next year. Most do a really good job of explaining it in their notifications. If not, their customer service departments are there to explain it.

Last year, my son got a "refund" from overpayment of escrow fees. I told him to put it into a seperate savings account because he'll need it this year - DON'T SPEND IT. Well, sure enough, he just got his new statement and he owes a lump sum or can have significantly higher monthly payments. He called to thank me, LOL.

I like that the banks are now required to refund overages in their escrow accounts. For 3 years I had a Countrywide loan that collected about $100 too much every month. Every year I had to go through a ton of red tape to get the refund.

I think the fact that people don't realize that taxes and insurance affect their payment is a sign of why so many got into ARMs and weren't prepared when they re-set. They just didn't pay attention. They heard what they wanted to hear (low payment) and the rest went in one ear and out the other.

Good info today Todd. The taxes here go up despite the value depreciation. The tax levy's have to remain at 33%. It's tricky when you the budgets are for the future and the property taxes are in arrears.

I have had those calls before...now I tell them that before closing. But right now, I think that most people should be checking to make sure that the lender is not putting too much in escrow for taxes. A lot of areas are seeing decreases due to decreased assessed values.

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